Education, Tenure and Innovation in Manufacturing Firms

Abstract

This study describes the stock of education and firm-specific work experience in a sample of Finnish manufacturing firms. The focus is in particular on the interaction of these competence measures with innovation. Generally speaking the levels of education are rising. Especially, the share of employees with a technical or natural scientific degree is increasing, together with the number of post-graduate degree employees. However, the sectoral differences are considerable. Industries of rapid technological change are very intensive in general and higher technical competences. In capital intensive industries, instead, the average tenure is clearly longer and the level of education lower.

The differences between innovating and non-innovating firms are examined, as well. Innovating firms have a more educated labor force, and they are more profitable than non-innovators. The better economic performance may result from the flexibility of innovating firms. For instance, they recovered clearly more rapidly from the economic slump of the turn of the decade 1980-90.

Product and process innovating firms are characterized also with principal components. The results lend support to the hypothesis that the size of the the firm affects the composition of R&D. It is observed that non-innovators are small and stagnating firms. Product innovators are slightly bigger, rather labor intensive, and endowed with high and increasing levels of general and technical competences. Comprehensive innovators, i.e. firms carrying out both product and process innovation remind in many respects product innovators, but are bigger, and have started to decrease their labor intensity. Finally, process innovators are the largest firms on average. Their labor intensity is significantly lower, and they rely more on research competences than general or technical skills.